U.S. Midterm Elections: Initial Impact Assessment

November 21, 2018
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Overview of Impact: The departure of some critics of the Indian IT industry in the U.S. reduces the possibility of the most extreme legislative challenges that the sector has been facing, with a likelihood of their less active consideration.

Senator Grassley’s anticipated move to Senate Finance would not impact his ability to reintroduce his legislation, but it would remove any control he has over the full Judiciary Committee’s agenda. (Presuming he did not become chair of the Immigration Subcommittee).

If Rep. Lofgren remains chair of the House Immigration Subcommittee we expect that high skill visa issues will remain a priority, but with Issa and Goodlatte gone we may have a greater chance of educating her about the many flaws in the current Issa legislation.

Further, the expanded divide that has emerged between the parties on immigration as a result of the campaign will almost certainly make it even more difficult for Republicans and Democrats, House and Senate and Congress and the White House to reach agreement. Not that this means that legislation would not still be introduced, hearings held, investigations convened, and bills possibly considered (marked-up) in subcommittee and full committee as they look to 2020.

We are optimistic that some of the newly elected members could emerge as informed and influential voices on technology and STEM issues. As Axios’ science editor Andrew Freedman points out, there are now at least seven representatives with STEM backgrounds, including newly elected Democrats. On the Senate side, former computer programmer and software developer Jacky Rosen defeated incumbent Republican Sen. Dean Heller in Nevada. Finally, with regard to the Administration, we do believe that it will continue and likely increase its attacks on the sector.

Headline News: The Democrats have won the House and the Republicans have won the Senate in the U.S. Midterm elections.

Analysis: Despite polling and pundits in the U.S. saying a landslide victory was likely for Democrats, they narrowly won the House while the Republicans expanded their lead in the Senate. Democrats may have done well in suburban areas as well as their traditional stronghold in urban areas, but the Senate election shows that, as in the 2014 election, Democrats are unable to compete in much of sub-urban and rural America. There was a record breaking voter turnout for a mid-term election and ultimately showed the growing divide between both the parties and rural and urban areas of the country.

As expected, Democrats secured a working majority in the House for next year by flipping at least 30 seats that are currently held by Republicans. A significant feat particularly given the changes to the congressional maps since the last time Democrats controlled the House. Also, as expected, Republicans maintained control of the Senate and increased the size of their majority. Roughly two-thirds of the Senate seats up for election were held by Democrats and the majority of Republican seats were from states that were deeply red. Majority Leader McConnell and President Trump also successfully used events such as Justice Kavanaugh’s hearing and immigration to isolate several incumbent Democrats and assist the Republican challengers.

Democrats performed well at a state and local level. Of the governor’s races called already, Democrats defeated four incumbent governors and won three open gubernatorial races for a net gain of seven. Democrats now control also had large pickups in state legislatures (flipping control of several state Senates and state Houses) and local races across the country. They also flipped seven state attorney general positions from Republican to Democratic control.

The changes in control and composition will create both new opportunities and challenges for the sector. The Indian IT sector will lose some friends such as Reps. Pete Sessions and Kevin Yoder, but at the same time some of the sector’s most strident opponents will also be leaving due to retirements or losses. This latter group includes members of Congress such as Senator Hatch as well as Reps. Issa, Goodlatte, and Lamar Smith. In the Administration, the close of the mid-term elections provided the backdrop for President Trump to request AG Sessions resignation.

With these results, the 116th Congress will move into the messaging field for the respective parties 2020 Presidential Election effort – and this will be the backdrop for the next session of Congress. House Democrats will use their new-found authorities to investigate the President and his Administration to paint a picture of extreme efforts to aid the wealthy and Trump allies, here and abroad. Their major challenge will be to seem reasonable themselves and not over-reach in terms of liberal social or spending policies. The Senate, with only a slightly enlarged Republican majority, will focus on confirming Trump nominated judges and new Administration nominees (a new Attorney General will need to be nominated and confirmed early in the 116th Congress). Finding areas of agreement between the Democratic House, Republican Senate and Trump White House, with an eye to 2020, will make for a rather constrained legislative agenda, especially given the upcoming need to pass a new debt ceiling limit and new spending caps for domestic and defense discretionary spending.